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Quantum Meruit - not a panacea

Quantum meruit, or "the amount he deserves" is a remedy that conceptually allows for restitution, where a party has requested services from another person, no agreement has been reached but the other party has unfairly benefited from the work requested and provided.

Moorgate Capital, a corporate finance advisory firm, brought a claim against the private equity firm H.I.G European Capital Partners. The claimant claimed that it was owed £1 million for its services in providing advice on an acquisition made by the defendant. The claimant alleged that the fee agreement was made orally at a marketing drinks event. The defendant disagreed, claiming that there was no oral agreement and that no enforceable contract had been entered into.

The first element of the claim was whether there was an enforceable contract between the parties. It was found that there had been no oral agreement at all.

the lack of contemporaneous or near contemporaneous evidence of the agreement

the occasion at which it was alleged the agreement had been discussed

the lack of any negotiation or discussion of services (the defendant allegedly just accepted £1 million)

the asserted terms being "implausible" in the circumstances (many of the aspects of the deal the fee related to were still a "moving feast") and

the role of the individual at the defendant with whom it was alleged agreement had been reached – who was not the individual with day-to-day conduct of the acquisition.

The alternative claim if no contract was found was for quantum meruit., although the finding of no contract also had an impact here: the Court stated that it was not the role of the law of unjust enrichment to create contracts for parties that they never made. The court made it clear that the success of a quantum meruit claim could not be assumed. There is no automatic right to compensation for services.

While the Court considered that HIG had been enriched by Moorgate's work, the key issue was whether that enrichment was unjust. The Judge held that the claimant could have contacted the defendant for agreement on the fees for its services, but failed to do so. The claimant then proceeded without a contract to provide its services. The Judge said that the claimant had "provided services in the hope of payment or some other advantage" and that it was "in the circumstances of this case, merely a risk-taker".

The claimant had been offered a goodwill payment of £80,000 by the defendant, which was declined leaving the claimant a "disappointed risk-taker". The court found that the claimant was a chancer who bore the risk of not being paid at their own peril.

Comment

This decision sends a clear message that there is no automatic right to payment where parties proceed without a contract. It also follows a run of similar cases, where one party believed that an agreement for a significant fee had been entered into, but the Court ultimately found no contract or that any terms which were agreed were too uncertain to be enforceable.

If services are provided without a contract with the intention to gain an advantage, then a claim for quantum meruit is an uncertain fallback position. Parties should always look to record agreements and formalise fee arrangements, rather than relying on quantum meruit for restitution at a later date. However, the position may differ where it is clear on the evidence that both parties expected a formal contract to follow and work started in anticipation.

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